Payday lender Wonga has raised the standard interest rate it quotes on its website by more than 1,600 percentage points to 5,853% – a move that is likely to increase calls for a cap on the cost of short-term credit.

The change comes as the Office of Fair Trading prepares to announce next week whether it will refer the payday loan industry to the Competition Commission following a year-long investigation.

Wonga, which offers loans of up to £1,000 arranged over periods of up to 45 days, previously quoted a typical annual percentage rate (APR) of 4,214%.

The new APR is based on a £150 loan taken out over 18 days, which would add up to £183.49 after adding fees and interest, with the quoted interest rate assuming that the loan is extended over a year.

Wonga, like other payday lenders, has always claimed that the APR is not a true reflection of the cost of the loan, as borrowers usually repay them within weeks. It argues that it should instead be allowed to quote a "Total Cost of Credit" figure.

Explaining the change on its Open Wonga blog, the company said: "While shorter Wonga loans cost less in real terms for our customers, this trend means a bigger representative APR. It's crazy but true.

"This is just another example of why not only we, but the Public Accounts Committee – a cross-party group of MPs – think the APR rules are 'outdated and misleading' when it comes to short-term credit."

However, critics of the industry point out that debts can add up quickly if borrowers miss repayments or roll their loans over.

Blomfield said Wonga's APR was "just another example why there needs to be tougher regulation of payday money lenders".

He added: "These interest rates are outrageous but only tell half the story. Borrowers are also encouraged to roll their loans over and face additional charges. My bill tries to tackle all of these issues."

Separately, Wonga has dropped an appeal against the Office of Fair Trading (OFT) over its debt-collection practices.

The OFT said that Wonga must not continue to do this without justification. It also told it to end another practice whereby people in certain occupations were told they should not be in debt.

After spending a year fighting the requirements, a Wonga spokesman said: "Regulation and compliance are extremely important to us, so we have decided to focus our resources on the requirements of the current OFT industry review rather than on an appeal about some isolated collections communications from over three years ago.

"Our collections team is sensitive to the needs of customers in genuine difficulty, while we also continue to keep bad debt at industry-leading lows."David Fisher, OFT senior director of consumer credit, said: "We imposed this requirement to make sure Wonga does not use certain debt collection practices it previously used. We welcome Wonga's decision to withdraw its appeal."